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Republican Lawmakers Take Aim at CFPB Pay Scale

Consumer Financial Protection Bureau employees could see their salaries fall by as
much as 25 percent under Republican legislation that would alter the agency’s pay
scale.

House Financial Services Committee Chairman Jeb Hensarling’s (R-Texas) Financial Choice
Act would shift the CFPB’s 1,600 employees from the more generous Federal Reserve
Board scale to the General Schedule that applies to most federal agencies.

A pay scale reclassification would amount to “a significant cut,” Lucy Morris, a partner
at Hudson Cook, LLP in Washington who served as CFPB deputy enforcement director in
2011-14, told Bloomberg BNA.

“I believe that would impact certain employees and their desire to stay,” she said.
“There are many employees who are dedicated to the mission and would stay.”

The pay-scale reclassification could amount to a 25 percent reduction in the annual
salary of a CFPB employee, Tom Pahl, a former CFPB lawyer who is a partner at Arnall
Golden Gregory LLP in Washington, told Bloomberg BNA.

“If you were to see a 20 to 25 percent drop in the pay of an existing employee, I
think people would give some thought as to how well they could do with other options—a
private law firm, for example,” he said. “Going forward, I think it would have more
of an effect on an ability to recruit.”

Before his stint at the CFPB in 2013-15, Pahl worked at the Federal Trade Commission,
including 10 years as a manager when he was involved in hiring employees under the
GS scale.

“You can get good people at the GS scale,” he said. “There may be some circumstances
where competing against banking institutions and law firms could be hard, for some
real competitive candidates.”

Banking Regulators Exempt

The House Republican attack on the CFPB pay scale predates Hensarling’s bill. In the
113th Congress, Sean Duffy (R-Wis.), introduced the CFPB Pay Fairness Act of 2013,
which won committee approval and was incorporated into a larger bill that passed the
House in 2014 but died in the Senate, then under Democratic control. Duffy’s language
on the pay scale was later folded into Hensarling’s Financial Choice Act.

The pay-scale bill drew little attention at a 90-minute hearing in October 2013 on
several CFPB-related measures. Daniel Silvers, an AFL-CIO lawyer who defended the
CFPB before the committee, was asked by Rep. Andy Barr (R-Ky.)
about the CFPB director’s ability to pay better than General Schedule (GS) rates.

“Congressman, all the bank regulators have this ability,” Silvers said. “It’s impossible
to be an effective banking regulator without the ability to hire competitively in
the banking sector.” Congress has exempted the CFPB, the Fed, the Federal Deposit
Insurance Corp., the Office of the Comptroller of the Currency and some other financial
regulators from the GS system, resulting in generally higher scales at those agencies.

Another separate, pay-related issue led to two hearings before the committee in early
2014, after news reports of an internal CFPB survey that disclosed younger, white
employees received disproportionately more favorable job ratings, and thus bigger
raises and bonuses, than their older, non-white colleagues.

Hensarling Readies New Bill

Hensarling’s bill will die with the end of the 114th Congress this year, but he has said that he will propose a version that closely tracks
the 2016 version after the next Congress convenes in January and will be joined in
the White House by a Republican, Donald Trump.

Congressional Republicans have directed steady fire at the CFPB almost since the passage
of Dodd-Frank in 2010 in response to the financial crisis. The bureau’s Democratic
supporters argue it’s necessary to police big banks and financial services and combat
abuse of consumers. Its detractors accuse the CFPB of regulatory overreach that stifles
businesses.

The Financial Choice Act would rechristen the CFPB as the Consumer Financial Opportunity
Commission and place it under a five-member commission instead of the sole, independent
director who now oversees the agency. It would bring the agency under the congressional
appropriations process; the agency now is funded outside that process, through the
Federal Reserve Board.

The act would subject proposed regulations to a stronger cost-benefit analysis and
to review by Congress. It would charge the agency with promoting free-market competition,
and it would roll back proposed or approved rules on payday lending and arbitration
clauses in consumer contracts.

To contact the reporter on this story: Gregory Roberts in Washington at
gRoberts@bna.com

To contact the editor responsible for this story: Michael Ferullo at
MFerullo@bna.com

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